Personal finance is all about meeting your personal financial goals. Whether it’s meeting your budget in the short term, hitting the long-term saving target for your retirement or simply paying off your debt, it’s important to have a plan.

If you don’t have a plan now, know that it’s never too late to start making one. Setting and meeting financial goals will give you and your family financial security and freedom to pursue other passions in life.

With that said, here are our top 4 tips to improve your personal finance.

1. Have a budget and stick to it

Having a budget is perhaps the most popular and most important tip that anyone can give you for improving personal finance.

With a budget in mind, you will have a clear picture of your financial situation. It is essential that you have a firm grasp of your income and expenses and how much you want to save for the long term.

Once you have assessed your finance, set up a framework on how much you want to spend and how much you want to save. For example, you can split your income into 3 parts:

2. Have a contingency plan

Don’t get caught with your pants down. A sudden layoff, an accident that leaves you hospitalized, or a house fire can leave you crippled financially.

It’s always worth it to set aside some money for such an emergency. You will never know what might happen so it’s important to be prepared.

The ideal safety net is about 6 months to a year worth of living expenses. If you save at least 20% of your income each month, you can fill up this emergency fund quite quickly. And make sure that you don’t stop saving even after you finish funding it.

3. Pay back your debt

Interest grows on interests. If you leave your debt alone long enough, they may snowball out of control.

Make sure to check all your interest rates and note which one is compounding. Prioritize paying those debts with compounding interest rates first to avoid paying a higher amount in the future.

Most people must borrow money in their lifetime; it’s inevitable. A mortgage for your first house, a car loan or a credit card; sometimes those debts are necessary. Do your research and calculate the amount that you will be paying per month.

Where possible, try to aggressively pay off outstanding debt. The sooner you pay off the principal debt amount, the lesser interest you will pay.

4. Plan your retirement

You may think that retirement is a long way away, but it can hit you a lot sooner than you’d think. The sooner you start saving and investing in your retirement fund, the more leeway you will have.

There are many ways to save and grow your investment funds. You can choose to invest your money into tax-exemption plans such as the Individual Retirement Account (IRA) or a 401(k) account, depending on whichever your employer offers.

Besides investment, you can also choose to fund your retirement with the Social Security benefits, or through permanent life insurance.

Whatever choice you make, please make sure that you have one.

In short

You should live within your means, pay off your debt, save as much as you can and have a retirement plan. We all know how personal finance can be tough and confusing sometimes.

It requires a lot of research, planning and even discipline to follow through with the plan. But it will be worth it at the end, being free from financial concerns and free to live however you want; so keep at it and persevere.

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